CTG Sector Insight

Resources & Environment: Carbon Capture to Value

CTG Sector Insights are one element of the CTG Monitor subscription service.

July 17, 2018

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Overview

CO2 to Mineralization

CO2 to Chemicals

Example Companies

Agenda

Carbon to Value: Overview

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Snapshot Market Dynamics & Key Trends

Drivers Challenges

Market Size: $4.2B

CAGR: 25%

TAM: $2.6T

Definition: Capturing CO2 and turning the waste product into new value stream

• Growing environmental concerns: Increasing demand to meet climate mitigation goals, largely driven through policy support.

• Financial incentives: Either in the form of a price for CO2 or in avoidance of penalty.

• Advancing to a low-carbon economy: Corporates are also pursing efforts to reduce CO2 footprint, as good citizens and/or in response to shareholders.

• Government financial support: Early-stage demo projects supported by government are helping build market trust and interest for CCUS solutions.

• High cost: Capital intensity and high investment risk.

• Creating a commercially viable process: Moving from research, pilot to commercial and financially viable business.

• Energy requirements: Where process is energy intensive, need to supply from low carbon sources.

• CO2 availability: Market potential is limited by the volume of waste or by the need for close-by sources of CO2.

• CO2 reuse: Efficient, low cost solutions for reusing industrial effluents or other sources of CO2 emissions.

• Monetizing CO2: Utilizing captured CO2 to create new chemical, carbonated and fuel-based products.

• Period of time that CO2 remains bound: Permanent CO2 storage solutions such as CO2 mineralization, which maximize the climate change mitigation potential, are more attractive than temporary removal solutions (such as CO2-to-fuel).

• CO2 clusters: Shared CO2 infrastructure can accelerate the deployment of CO2 reuse solutions through risk/burden sharing.

• TAM: The maximum market size available from capturing the 36 billion tons of CO2 emitted from fossil and industrial sources globally per year.

Source: Business Wire

Carbon to Value: Value chain

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Va

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• Services for identifying opportunity as well as developing and financing projects.

• EPC services that can procure the CO2 capture, transport and utilization solutions.

• Capturing waste CO2 from large point sources, such as fossil fuel power plants or industrial factories.

• Extracting CO2 from the air.

• Extracting CO2 from a combustion process.

• Activities involved with monitoring emissions during transport and storage.

• Activities involved with transporting CO2.

• Typically involves pipelines, but can involve shipping or rail.

• Converting captured CO2 into commercial products and services.

Dir

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• Industrial plant owner.• Power plant owner.• CCUS technology team.

• Owner of CO2 emitting infrastructure.

• Direct CO2 purchasers.

• Owner of CCUS infrastructure/assets.

• End user of new materials/products.

Va

lue

P

rop

osi

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n Identify opportunities to commercialize CO2 waste.

Improve the efficiency of capturing CO2.

Increase the safety and reliability of CO2 control to reduce risk.

Monetizing captured CO2, turning waste into value.

CO2 Capture CO2 UtilizationCO2 Monitoring &

TransportProject Development

Pre-Combustion Capture

Oxyfuel Combustion Capture

Enhanced Commodity Production

Enhanced Fuel Recovery

Ambient CO2 Capture

CO2 Monitoring

Pipe Leak DetectionProject Development

Engineering, Procurement and Construction

CO2 Mineralization

CO2 To Fuel

Food & Drink

CO2 Capture CO2 UtilizationCO2 Monitoring and

TransportProject Development

Turnkey

Post-Combustion Capture

CO2 To Chemicals

Carbon to Value: Value chain with business activities and examples

Focus of current Insight

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Tees Valley Industrial Cluster, UK

• UK Government has committed $133M to fund CCUS innovation and deployment. ICCS recognized as vital to meet emissions targets.

• ICCS cluster in the Tees Valley is the the planning phase. It will decarbonize 22% of the UK’s manufacturing emissions and create a the value added revenue streams for the CO2 producing businesses (including chemical, steel producers).

• Clustering would lower the risk and decrease investment costs into CCUS, attracting new chemical/steel players within the cluster.

• Key challenge will be building the right regulatory/policy conditions to attract private investment, and maintaining the risk of carbon leakage so that industrial players do not relocate to less rigid clusters.

Carbon to Value: Industrial clusters

• Industrial CCUS clusters (ICCS) provide opportunities for shared infrastructure: capture, transport and utilization.

• Tapping into infrastructure that serves numerous stakeholders enables opportunities to both establish smaller capture facilities where standalone CCUS is typically uneconomical, as well as encourage new CCUS activities.

• Clustering can lower risk and help accelerate the deployment of newer CO2 mineralization and CO2 to chemical technologies which are hampered by large initial costs.

Industrial CO2 clusters

The Port of Antwerp CCUS Cluster, Belgium

• The Port of Antwerp is the largest chemical cluster in Europe, currently in the feasibility stage of developing a ICCS cluster. A waste-to-value reuse solution is viewed as the ultimate long-term solution.

• CO2 storage and EOR is being explored as a short-term goal to meet emission targets; however, they see potential for other CO2 reuse methods in around 10 years, converting into high-value products with additional revenue streams for the Port’s stakeholders.

• CO2 clustering would help sustain the carbon heavy petrochemicals activities within the cluster and could help prevent potential deceleration of economic activity within the Port.

Examples

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Overview

CO2 to Mineralization

CO2 to Chemicals

Example Companies

Agenda

Slow path to commercial success

• CO2 mineralization binds CO2 onto other minerals, resulting in its permanent storage as a solid. The carbonated products can be used as carbon negative replacements for other valuable materials including cement and calcium carbonate.

• CO2 mineralization is more environmentally attractive as a long term remedy than other technologies, which merely delay the time that the CO2 takes to go back into the atmosphere (e.g. CO2 to fuel, EOR).

• Technology challenges around inefficient and costly carbonation reaction rates limited investor interest.

• Demo projects, largely funded through governments around the world, are helping the technology to gain momentum.

• Many technologies are still in their infancy, with most projects at around TRL level 6/7. One of the challenges is to move beyond just storing the CO2 to adding value to the end product through improved performance.

• A few large corporates have funded large standalone projects at commercial scale.

• Companies like CarbonCure, with a demonstrated infrastructure-as-a-service business model, have been able to build on pilots to attract capital

• Over 4 billion metric tons of cement are manufactured every year, contributing to around 6% of global emissions.

• CO2 mineralization startups are promising to cut the carbon footprint of concrete production by 70%.

• An estimated $400B market opportunity exists for CO2 reuse products in the concrete sector, potentially reducing 1.4 gigatons ofannual CO2 emissions by 2030.

• Carbon-negative alternatives to Portland cement are entering the marketplace to prove commercial viability and currently only represent a small fraction of total production.

• Solidia has continued to make commercial and technical progress toward disrupting the concrete market through a process that eases production, reduces costs, and improves performances of cement and concrete. The company has recently secured one industry customer but requires more partnerships to help with scale.

• Concrete is historically a conservative, risk-averse market, therefore more confidence with new products is needed before wide adoption can be reached.

Highlight: Concrete Industry

Key Themes: CO2 mineralization

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Ecosystem Activity Key Takeaways

• April 18 : COSIA Carbon XPRIZE Challenge – Launched in 2015, 10 finalists, including 5 carbonation (CarbonCure, Carbicrete, Carbon Upcycling UCLA, Carbon Upcycling Technologies and Carbon Capture Machine) & 3 CO2 –chemical startups (C2CNT, CERT, Newlight) have received $5 million to build demo plants, competing for $20M.

• Nov 17: C02 Value Europe (CVE) – New think&do-tank for CCUS, funded through EE R&I Programme, Horizon 2020 and the SCOT project, aiming to become the reference sparring-partner for all stakeholders.

• May 18: Lafarge Accelerator – Construction accelerator program which has taken CarbonCure and Carbon Upcycling Technologies into the first cohort.

• Oct 17: OGCI Initiative – $1 billion fund to scale technologies that reduce the GHG emissions, supported by 10 O&G CEOs. The fund will have a key focus on CCUS in 2019 and has invested in Soildia Technologies.

• Feb 18: 45Q Tax Credit – Modified tax codes, part of the US budget bill that increases financial certainty for carbon capture project investors by eliminating the existing cap on credits. Increases credit value, closing the gap between the cost of capture and revenue from the sale of CO2.

• The XPRIZE, which since 1996, has sought to bring about radical breakthroughs for the benefit of society through incentivized competition, has been critical in accelerating the development of CCUS technologies.

• CVE is an EU-funded, corporate-led effort to create a research and innovation roadmap, promoting development and market deployment for CCUS.

• CVE will help trigger the emergence of large scale industrial pilot and demo projects across sectors and guide public (EU / national) and private funding.

• Bill will help to drive industrial sector participation by lowering tonnage threshold for project eligibility.

• Reuse projects must result in a net reduction in emissions on a lifecycle basis, meaning some could fall short.

• Corporates are increasing engagement and investment at earlier stages of the technology development cycle, with interest at stages TRL 4 and above.

• Construction industry taking a closer look at commercializing C2V technologies

• $1B can go a long way to commercializing C2V technologies, while helping the image of O&G companies.

Enabler Activities

Government Activities

Incumbent Activities

Activity Analysis: CO2 mineralization

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CustomerInvestment Pilot PartnershipIncubate/ Accelerate Grant

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Investors

Local Authorities

Ecosystem Map: CO2 mineralization

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Overview

CO2 to Mineralization

CO2 to Chemicals

Example Companies

Agenda

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Highlight: Polymer Industry

Key Themes: CO2 to Chemicals (C2C)

• CO2 is used as a feedstock, undergoing a catalytic transformation into a range of intermediates, which are then processed further into various valuable chemicals (including polymers and formic acid). CO2 is temporarily stored for the lifetime of the product.

• Economic rationale for producing these products includes lower cost and lower carbon than their fossil-derived counterparts.

• New market activities within C2C focus on polymer production. Previous markets that have been successful include Ethylene Glycoland Isopropanol production.

• There has been some successful partnerships: IKEA and Newlight Technologies partnered for the use of biodegradable, CO2-based plastics. Liquid Light and Coca-Cola partnered for Coca-Cola to develop CO2-based plastic bottles.

• As C2C is not a long term CO2 storage solution, facilities in the US may not be eligible for 45Q tax credits, which could hamper the segment’s long term success.

• Similarly to CO2 mineralization, infrastructure costs and the resulting high risk has slowed commercialization.

• CO2 conversion to polymers has been researched since the 1960s; however, new approaches that allow polymers to be produced under low pressures and at ambient temperatures mean that solutions are now competitive, and in some cases, better than traditional petrochemical-based feedstocks.

• CO2-based polymers have the potential to entirely replace conventional polyols such as polyether and polyester in their end-use with reduced costs (between 15-30%).

• There is huge potential for the variety of addressable markets. For polyurethane, CO2-based polymers have direct applicability to existing supply chains with a predicted market size of $83 billion by 2023.

• Currently, the global production of CO2-based polymers is limited. Furthermore, uptake has been slow due to the risk averseness in the chemicals industry for commercializing new products.

• A few companies have demo plants at TRL level 8 with TRL for the technology expected to reach TRL 9 by 2030.

C2C Today

Ecosystem Activity Key Takeaways

Incumbent Activities

Activity Analysis: CO2 to Chemicals

• EnCO2re – An EU innovation and market development program for CO2 reuse, co-initiated by Climate-KIC and industry partner Covestro.

• Jan 18: BioRECO2VER – A 4-year European Horizon 2020 project, coordinated by VITO, focusing on processes which turn CO2 into valuable platform chemicals like lactate and isobutene.

• European commitment to the energy transition and CO2 reuse.

• European innovation capacity - Europe has the industrial capacity for a large scale roll-out given the established and strong chemical industry and energy industry.

• April 18: Covestro – Plastics developer will be targeting new markets such as sustainable mattresses from their CO2-based material, cardyon™.

• Feb 18: OGCI Initiative – The billion-dollar fund led by 10 O&G CEOs for technologies that reduce the emissions invested in Econic Technologies, a developer of catalysts that enable polycarbonate polyols and polymers.

• Jan 18: Specialty Chemicals Project – Evonik and Siemens partnered to work on a project to converts CO2 into specialty chemicals.

• Corporates are increasing engagement in sustainable CO2-based chemical production, focusing mostly on polymer-based applications.

• Covestro is a leader in CO2 to chemicals, already establishing four plants for the manufacture of the CO2-based polyol feedstocks, with hopes for a 100ktpa facility in the next five years.

• OGCI’s goal illustrates O&G incumbent commitment to patient capital.

• May 18: EU plastic ban – EU commission has proposed an EU-wide ban on single-use plastic products.

• Regulations will act as a springboard for companies to accelerate commercialization of sustainable alternatives for plastics including CO2 polymers.

• New regulation will have to ensure that CO2-based plastics are not ruled out.

Enabler Activities

Government Activities

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Investors

Ecosystem Map: CO2 to Chemicals (C2C)

Local Authorities

CustomerInvestment Pilot PartnershipIncubate/ Accelerate Grant

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Overview

CO2 to Mineralization

CO2 to Chemicals

Example Companies

Agenda

Carbon to Value: Innovator examples

CO2 to Chemicals: Developer of catalysts that enable polycarbonate polyols and polymers.

Contact: Rowena Sellens, CEOInvestment: $28.78M capital raised

Projects:

• Opened first demo plant based in UK (6 March 18).

• Partnered with one of Thailand’s largest petrochemical companies, SCG Chemicals.

Insights & Outlook:

• Developed a technology that builds CO2 into plastics and significantly reduces cost.

• Targeting high growth >$20 billion polyol market.

• Engaging market through established global polyol suppliers.

CO2 Mineralization: Producer of CCUS equipment for precast concrete production.

Contact: Robert Niven, CEO

Investment: $9.22M capital raised

Projects:

• 100+ installations in concrete plants.

• Partners include Permacon, Shaw Group, Brampton Brick and Thomas Concrete.

• Recently been taken into the Lafarge Accelerator program (23 May 2018).

Insights & Outlook:

• Infrastructure-as-a-service business model, retrofitting concrete plants at zero cost, charging a licensing fee for usage.

• Output is calcium carbonate, which increases the strength and value.

• Market size is an estimated 5,500 plants in the US alone.

CO2 to Chemicals & Fuels: Developer of CCU technology which uses biological conversion of carbon to products.

Contact: Freya Burton, Communications

Investment: $210M capital raised

Projects:

• 4 demo plants

• Partnered with ArcelorMittal to construct Europe’s first commercial production facility to create bioethanol.

• Various commercial projects in Asia with China Steel, Capital Steel, Baosteeland Blue Scope.

Insights & Outlook:

• Value proposition focused on converting carbon gases into products such as jet fuel, ethanol, or chemicals.

• Positive traction in China, specifically with steel mills.

• $150M project investment from ArcelorMittal in (June 18).

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Carbon to Value: Incumbent examples

CO2 to Chemicals, Sweden

• A group that designs and sells ready-to-assemble furniture, kitchen appliances and home accessories.

• Partnered with Newlight Technologies in 2016 under a technology license agreement to supply IKEA with Air Carbon, allowing IKEA to produce CO2-based thermoplastic.

• Under the $13B license, IKEA has exclusive rights in the home furnishings industry to use Newlight’s CCUS technology.

Insights & Outlook:

• IKEA’s long-term ambition is for all the plastic material used in their home furnishing products to be renewable or recycled material.

• IKEA purchases 50% of the material from Newlight’s 23,000 capacity, but plans to develop capacities up to 453 kilo tons per annum.

CO2 to Chemicals, Germany

• A Bayer spin-off formed in 2015. One of the largest polymer companies with over 30 production sites globally.

• Since 2016, Covestro has been producing CO2-based polyols in Germany with an annual capacity of 5,000 metric tons. The CO2 processed is a waste product from a neighboring chemical facility.

• Leading a EU research project with 14 partners to investigate how flue gas from the steel industry can be used to produce plastics.

Insights & Outlook:

• Sustainably focused consumer expectations is leading to Covestro’s new waste and reuse approach.

• A market leader in the commercial CO2 reuse space for polymer production.

CO2 Mineralization, USA

• Thomas Concrete is the largest independent, ready mixed producer in Georgia, North Carolina, and South Carolina and has 144 plants globally.

• Partnered with CarbonCure since 2016 to reuse waste CO2 in concrete to increase its environmental, material, and economic performance.

• Recently announced to license the tech on an additional 16 plants (22 total).

Insights & Outlook:

• Thorough scale growth, Thomas Concrete could reuse 700 megatons of CO2 each year.

• Savings realized through the decreased amount of cement needed by concrete producers to make concrete (due to increased cement strength).

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